UK gas prices to remain elevated this winter

Reuters reports that winter gas prices in Britain are likely to remain elevated due to high coal prices, uncertainty about French nuclear outages and low gas storage inventories.

Earlier this year, winter 2017 gas prices rose to levels unseen since 2015. The winter 2018 contract is currently trading at around 49 pence per therm and analysts expect it to average around 48 p/therm.

National Grid have said Britain can meet electricity demand this winter, however analysts say that the gas market is far less relaxed.

The concern is due to lower-than-expected nuclear output in France which has raised demand for gas there, high coal prices of around US$90/t (leading to greater demand for gas as a more competitive substitute), low gas storage quantities and uncertainty about LNG deliveries to Britain and North West Europe. Furthermore there is also concern that due to China’s growing demand large quantities of stockpiled LNG will be diverted eastwards as European prices remain lower than Asian LNG rates.